An audit is a fairly intensive process that includes conducting tests and gathering independent verification and evidence supporting the amounts and disclosures in the financial statements. An audit provides a reasonable (but not absolute) assurance that the organization’s financial statements are free of material misstatement. Crosby & Kaneda provides audit services to nonprofit organizations with operating budgets ranging from $300,000 to $10 million (and beyond).
We supplement our audit reports with recommendations to strengthen the design or operation of the internal control structure of the organization and financial management practices. These recommendations are detailed in an internal control management letter issued to the Board of Directors.
When properly and consistently used, internal controls may reduce the risk that assets are misused, while promoting timely detection of errors in your financial statements.
When to get an audit?
For many organizations with revenue > $2M an audit may be required under California law.
For organizations with revenue > $1M an audit is a common requirement of funders or is considered “best practice” by boards as part of their financial oversight of the Organization.
For organization with revenue > $500K practice ranges from annual audits to periodic audits (once every 2 or 3 years) with reviews in the intervening periods or simply reviews only.
For organizations with revenue < $500K an audit is often a matter of judgement and audits are less commonly seen. Common reasons for an audit at this size is to be audit ready for expected growth, to provide a learning opportunity for staff or to comply with a regulation or funder requirement.
One item of note: If “your latest audited financial statements” is an item on the list of requests from a government or foundation, that may not mean you absolutely have to have an audit especially if your organization has less than $500,000 in revenue. Some funders will agree to accept a 990 tax form prepared and signed by a CPA, or a financial review. It doesn’t hurt to ask. If a potential funder insists on an audit — especially if they indicate that you have a good chance at receiving funding that will more than cover the audit fee – many organization’s carry out an audit.
A limitation of a regular GAAS audit is that we do not audit or offer an opinion on your system of internal control. We are still able to to provide certain feedback with respect to matters we notice in the course of work in the form of a private letter to management and the board.
If you need a regular Generally Accepted Auditing Standards audit – please reach out to us!
Yellowbook (Governmental) Audits
GAGAS (Generally Accepted Government Auditing Standards) are the rules that govern audits for government agencies. While not common a government funder may require that organizations they fund are audited under GAGAS standards. We are not currently issuing proposals for such engagements unless the Organization has a CPA on staff.
A-133 / 2 CFR 200 Single Audits (Federal Expenditures)
Circular A-133 and commonly referred to as the “a Single Audit Act” sets forth audit requirements for organizations that expend $750,000 or more of federal funds in any one year. Because of the smaller number of organizations required to complete such audits as a result of increases in the single audit threshold we do not engage in single audits as our costs to provide the service would be prohibitive for most clients.